life insurance premiums are determined basically by the

How is my insurance premium calculated?

An insurance premium is the money charged by insurance companies for coverage. Insurance premiums for services differ from company to company, so it is advisable that individuals shop around for insurance premiums. However, it is important to note that, sometimes, insurance premiums quoted are slightly different from the premiums charged. The difference between the quote and the actual charge can be attributed to the way the insurance premium is calculated. The amount of insurance premiums charged by the insurance companies is determined by statistics and mathematical calculations done by the underwriting department of the insurance company.

The level of insurance premium charged to a customer depends on statistical data that exists about life history, age and health. For example, an 18-year-old man who drives a red sports car is more likely to pay a higher insurance premium than a 50-year-old man who drives a four-door sedan. Every customer that applies for insurance goes through the underwriting process. The underwriting process involves investigation into familial diseases, analysis of reports like medical information bureau and motor vehicle reports. After the information is gathered and analyzed, they are typically analyzed by a statistician, called actuaries, hired by the insurance companies. After analyzing the data, the actuary tries to predict how likely the insurance applicant will make a claim on their policy. The higher the probability of a claim, the higher the premiums usually are.

The actuaries are also responsible for studying mathematical data and compiling "mortality and sickness" tables, which are used to predict prospective losses due to death and sicknesses. The mortality and sickness tables are basically tables that assign probability to gender and ages about the likelihood to get sick or die. The actuaries use these tables to develop models that determine how likely it is for a particular individual to get sick or die at a particular time, based on the data gathered for that individual. Based on the results of the analysis of data and the information generated from the mortality and sickness tables, a premium is assigned or charges to the client. (To learn more about the industry, check out The Industry Handbook: The Insurance Industry)

I've been selling life insurance for 25 years, and am still amazed at the genius behind setting pricing. There's an entire industry of underwriters, actuaries, and business managers who collectively set premiums. These people actually use a systematic method of determining your probable mortality, factor in standard business costs, and at the same time, consider potential investment returns so that the carrier can still make money while obligating itself to pay your beneficiaries within a week or so of a claim being filed. The net result has been trillions of dollars pouring into the economy through claims being paid over decades, and many hundreds of companies flourishing in the process. For me, this is quite a success story.

And don't forget that mortality itself is a very sophisticated topic. Virtually every part of life affects mortality, and these people have to consider it all. Underwriting considers current health, medical history, family medical history, vocation, avocation, lifestyle, and financial/criminal/motor vehicle record. I think that life insurance by far is the most exhaustive qualifying process for any purchase, certainly in the financial world.

eligibility

plan requirements

schedule of benefits coverage/benefit amount

benefit maximums

reduction rules

how premium rates are calculated

Earnings schedule: This is the most common methods of determining an employee's insurance amount and is based (as the title stipulates) on a percentage or multiple of annual earnings. Employee earnings for this type of schedule includes only base earnings (excludes bonus). Generally coverage is provided equal to one times earnings, however can be provided at two or three times earnings. Typically, higher multiples are provided for classes of executives. The benefit amount is rounded to the nearest higher $1,000 and may be subject to a maximum benefit amount.

Flat benefit schedule: Earnings and position/class are not important under a flat benefit schedule. With this form of benefit schedule, all employees are grouped under one class and all receive the same benefit amount regardless of earnings or position/class. Flat benefit schedules are commonly used among unionized groups covering hourly employees.

Length of service schedule: The benefit amount using this type of schedule increases with the number of years an employee has been working for the employer. Once used as a means of rewarding long-service employees, this schedule is rarely used anymore. This schedule can be challenged as discriminatory under human rights legislation in certain cirmcumstances.

Combination schedule: Benefit amounts can also be based on a schedule that is tied to various employment factors, such as earnings and position, and often chosen by the employer to reward the most valuable employees. A common insurance schedule can be designed to provide salaried employees with insurance based on a multiple of earnings, while hourly employees are eligible for a flat benefit amount.

coverage can be reduced by a set percentage of pre-retirement coverage

the amount of coverage can be limited to a flat dollar amount

benefits can be reduced gradually on a declining scale by a certain percentage each year until a pre-determined minimum is reached.

an employee's married or common law spouse of the same or opposite sex who has been living with the employee for at least 12 consecutive months

unmarried children (including step-children and adopted children) of the employee and/or spouse between a specified age range, usually 14 days to 21 years of age (25 year if in full-time at school or university), who are dependent solely on the employee for financial support. Dependent children, who prior to attaining limiting ages, were insured under the plan and who become mentally or physically incapacitated may continue to be covered beyond such ages, provided they continue to be dependent solely on the employee for financial support.

With an aging population and a wave of baby boomers on the verge of retiring in the coming years, post-retirement benefits, including post-retirement life insurance, are receiving considerable attention from employers.

Determining Life Insurance Premiums for Term and Level-Premium Policies

There are 2 basic methods of determining premiums for life insurance: the yearly renewable term method and the level premium method. While there are many different types of life insurance policies, their financial basis rests on these 2 methods or their variations.

The yearly renewable term insurance policy covers the policyholder for 1 year. It provides no cash value, so most of the premium covers the mortality charge, the amount that must be paid for those who die. The cost of the premium is largely determined by the death rate of each age group. Each policyholder must pay the pro rata share of death claims within his age group.

For instance, consider a group of 1,000 50 year old nonsmoking males that want $1,000 of life insurance. This is the mortality rate, based on the 2001 Commissioners Standard Ordinary (CSO) Table of Mortality:

Mortality Table by Decade

Out of 1,000 50 year old nonsmoking males, 3.32, or 0.332%, will die before reaching age 51. An insurer of this group would have to pay out $3,320 for the death claims. That means that it would have to collect at least $3.32 per year from each policyholder to cover the death claims (and, of course, a little extra for operating expenses and profit).

As you can see, the premiums rise steeply in the later ages. This is why the premium increases each year that the policy is renewed. If you are a smoker, take note that smokers have almost twice the death rate for both men and women at most age levels. The difference between men and women and between smokers and nonsmokers diminishes as they approach the age of 120. However, don't count on living that long! Very few people live to be 120, although that number should increase significantly with advances in medical technology and the increase in healthy lifestyles.

Why bother classifying people as men or women, or as smokers and nonsmokers for calculating premiums. Because there is a significant difference in life expectancies for the groups. For instance, if one insurance company charged the composite rate for all people in an age group, then other insurance companies would offer the women and nonsmokers a lower rate and take away business from the insurance company charging a composite rate. That company would suffer from adverse selection, because the composite rate is lower for the high risks and higher for the low risks. Thus, the low risk group would buy insurance from other companies because of the lower rate, and then the company charging the composite rate would have to charge higher prices to cover the high risk group.

Then why not extend this segmentation by classifying people according to family history of disease or genetics, for instance? Because, currently, it is not easy to segment the population in this way, and there may not be a large enough difference in mortality rates to justify the expense of segmentation. There will also certainly be political and social resistance to this degree of segmentation, since it will be viewed as an invasion of privacy and discrimination. Of course, basing life insurance premiums on sex and smoking status can also be viewed as discriminatory, but it has a sound actuarial basis. However, sex and smoking status, unlike family history or genetics, are easily observable traits, and, thus, cannot be considered an invasion of privacy.

Nonetheless, as technology advances, there will probably be more attempts at segmentation based on genetics. While many view it as discriminatory, others will argue, and rightly so, that to not allow it would force others to subsidize the premiums of others. Since insurance rates are determined by the death rate of the insured, including people with a higher death rate at the same premium would make the premium higher for all. As with the different rates for sex and smoking status, companies will offer those who are willing to show their good genetic profiles better rates, which, in turn, will cause adverse selection for the other companies not using genetics, which, in turn, will force companies either to raise their premiums for all or to start using genetic profiles as well.

Level-Premium, Legal Reserve, Net Amount at Risk

The level-premium method is used to determine premium prices for lifetime protection by charging a single premium rate while the policy is in force. The life insurance policy provides protection to age 100. If the insured survives to 100, then the face value of the policy will be paid to the owner of the policy.

To be able to charge a level premium for the life of the policy, the premium must be higher in the early years of the policy than is needed to cover the mortality charge. The excess money is segregated into a fund and invested to cover the mortality charge in later years when the premium will be less than that needed to cover death claims.

The method of investing and accumulating the fund is regulated by state law; therefore, it is called a legal reserve. The states require a minimum amount of legal reserves to maintain the insurance company's solvency, so that it can pay claims and benefits, and is generally commensurate with its contractual liabilities of the policies that it has written. The legal reserve covers all policies that an insurance company writes, and is equal to the present value of future death claims minus the present value of future premiums.

Why use present value? Because insurance companies invest the premiums to earn interest, so the present value accounts for this interest. The interest earned lowers the legal reserve requirements. As the insured gets older, the present value of the death claim becomes greater because there is less time until death; at the same time, the number of future payments that will be made is declining, and, thus, the present value of the future premium payments is also declining.

The legal reserve can also be viewed at the individual policy level. With individual policies, the legal reserve increases steadily, reaching the face value of the policy at age 100. Obviously, the later the policy is purchased and the higher the amount of insurance, the more expensive the premiums.

The difference between the face amount of the policy and the legal reserve is the net amount at risk for the insurer, which is pure insurance. If you should die before age 100, then the insurance company loses the net amount at risk for your individual policy. This loss is compensated by the premiums of those who haven't died yet, and from income from the invested premiums. Since the sum of the net amount at risk and the legal reserve equals the face value of the policy, the net amount at risk and the legal reserve are inversely proportional. As the legal reserve increases, the net amount at risk decreases.

Face Value of Policy = Legal Reserve + Net Amount at Risk

The legal reserve requirements of most policies are either currently based or soon will be based on the 2001 Commissioners Standard Ordinary (CSO) Mortality Table.

The main purpose of the legal reserve is to provide lifetime protection, but because more money is collected in premiums in the early years than is needed to cover the mortality charge, level-premium policies develop a cash value, which the policyholder can borrow against, or can surrender the policy for its cash value if the policyholder no longer wishes to continue the life insurance policy. However, the cash value is initially less than the legal reserve because of deductions of sales expenses and other acquisition costs.

If you want to buy insurance, but are unsure for how long, it is better to buy term insurance initially, especially convertible term insurance, because it is much cheaper than a level-premium policy, which is designed for lifetime protection. A level-premium policy that is terminated within the 1 st few years will have little or no cash value and will have cost considerably more than comparable term insurance. A convertible term policy can be converted to a cash-value policy without providing evidence of insurability.

wiseGEEK: What is an Insurance Premium?

An insurance premium is the amount of money charged by a company for active coverage. The sum a person pays in premiums, also referred to as the rate, is determined by several factors, including age, health, and the area a person lives in. People pay these rates annually or in smaller payments over the course of the year, and the amount can change over time. When insurance premiums are not paid, the policy is typically considered void and companies will not honor claims against it.

Generally, premiums cover whatever is detailed in the insurance policy, and the services provided or paid for depend entirely on the specific policy and type of protection. The following are the most common varieties and the basic services they often cover. Consumers should keep in mind that not all of these types of insurance are available or common in all countries, and there are many other kinds.

Life insurance typically pays a lump sum in the event of the policyholder's death to those detailed in the person’s will or the plan itself. It may pay for funeral arrangements, outstanding debt, living expenses for those left behind, or other expenses related to the deceased's estate.

Health insurance often pays for some portion of the expense of office visits, prescription medications, surgical procedures, mental health services, ongoing treatment, and/or emergency services. Not all of these services are always covered, however, and plans can vary widely. A person may have to pay out of pocket for certain services or for a percentage of the cost of services rendered.

Car insurance premiums usually cover damages to the policyholder's vehicle, any other vehicles in an accident, roadside help, and/or medical bills related to an accident. Motorcycle, boat, and other types of motorized vehicle coverage usually provide the same types of services.

Home owners' insurance, which is typically paid yearly or as a part of a combined escrow mortgage payment in some countries, usually covers damages to a home as well as its contents in the case of theft, fire, storms, and many other disasters. Renter's coverage is similar, although usually only pays for damage caused by the policyholder or damage to the policyholder's personal items.

The starting point for an insurance premium is largely based on statistics, though people's habits and history can cause the rate to be higher or lower. A 22-year-old male seeking coverage for a sports car can often anticipate higher premiums than a 45-year-old woman driving a mid-size sedan. Both may have excellent driving records, but the insurance company considers a younger driver in a faster car more at risk for accidents than it does an experienced driver in a slower vehicle; therefore, the insurance quotes will usually be noticeably different.

The same philosophy holds true for medical insurance premiums in countries where the government does not provide health care to its citizens. People with health problems or who engage in unhealthy activities and those in dangerous fields of work often pay significantly more for insurance than healthy individuals with safe jobs. For example, non-smokers statistically live healthier lives than smokers, and construction workers may have more serious on-the-job accidents than accountants. Therefore, a construction foreperson who smokes will typically pay much more in premiums than a non-smoking CPA.

Insurance rates also vary by area. When it comes to automobile coverage, companies that provide service in cities or regions that statistically show an above-normal accident rate will often charge more than companies in places where there are fewer accidents. For property insurance, the size and age of the property, how close it is to a flood zone, and the chances of bad weather are all considered, as is the amount of money a homeowner will need to replace his or her household goods, when a company is fixing rates.

The cost of a premium for the same service can vary widely among providers, which is why experts strongly recommend that consumers get several price quotes before committing to a policy. People should keep in mind that the lowest quoted price on a premium may be the better bargain, but the insurance policy may not provide much coverage.

Insurance companies can raise premium rates for any number of reasons, but one of the most common is a high number of claims on the policy. An insurer typically bases its prices on how much it will end up paying over the life of the policy; ideally, it tries to pay out less than what the policyholder pays in. When a person regularly files claims against the insurance policy, the company has to pay out more, limiting its profit margin. As a result, it will often raise premiums to recover this cost.

In this same line, an insurer may raise rates if it expects an increase in claims. For example, if an otherwise healthy individual sustains permanent injuries in a car accident, her health insurance company may increase her premiums because it expects her healthcare costs to go up. Rates may also rise generally due to a price hike in services, to pay for claims from other policy holders, or to keep up with inflation.

For property insurance, whether homeowner or rental, instances where the property is rezoned into a flood zone, earthquake zone, or similar situations may cause rates to rise. Renting out a primary residence or keeping certain animals or items, such as a trampoline or pool, on the property may also cause an increase.

Although it is most common for rates to rise, they can also be lowered. Some car insurance companies offer good driver discounts, for example, or even lower rates for students who earn good grades in school. Changes or improvements to the item being insured can also cause premiums to go down; a house may qualify for a discount if it has a fire suppression system installed, for example, or a car with airbags may cost less to insure. Many insurance companies offer reductions or reimbursements for lifestyle changes, such as quitting smoking or joining a gym.

An insurance premium is usually collected in monthly, semi-yearly, or yearly payments, depending on the type of policy. Policyholders also often have the option of combining their payments with fees for other services, or taking out several types of policies with one company to lower the overall costs. For example, buying both car and renter's insurance from the same insurance company may give the buyer a discount on both.

If the policyholder fails to make a scheduled payment, the company can choose to cancel the plan entirely. This is often referred to as a "lapsed policy," and the customer will typically be required to either pay the balance of the insurance premium and be reinstated or the policy will be voided. Because the billing cycle can be lengthy in some cases, it is not uncommon for policy holders to forget to make a payment before the policy lapses. In almost all cases, a person cannot make a claim against a policy that is not current in premium payments.

A person also cannot receive a refund on his or her insurance payments, in most cases, even if he or she never makes a claim on the policy. While this may seem like a waste of money, one large claim can more than make up the difference, and having this peace of mind is worth it for most people. Life insurance works slightly differently, however, and it may be possible to withdraw money from the policy, borrow against it, or sell it for cash. Doing this may have tax implications, however, and may mean that the beneficiaries will not get the same amount of money after the policyholder dies.

The Best Life Insurance Companies

The top performers in our review areMetLife, the Gold Award winner;Fidelity Life, the Silver Award winner; andNationwide, the Bronze Award winner. Here’s more on choosing life insurance to meet your needs, along with detail on how we arrived at our ranking of the ten best life insurance companies.

One's own mortality is not something most of us like to think about, but you and your family can benefit from thinking about it now to find a good life insurance policy to help you support your family, honor your business agreements or pay off debtors. Life insurance can help cover costs such as your mortgage, credit card debt, burial expenses, medical bills and legal fees. If you have children, it can help pay for their daily life expenses and education. Some life insurance options also help you create a cash value investment that you can borrow against for things like a down payment on a house or to pay large medical bills.

Life insurance is most beneficial for those who have children, a non-working spouse or others that depend on them. It is especially beneficial if you have a disabled child who needs care long-term care. Older persons who have paid off their home and have grown children can benefit from at least having their burial costs covered so as to not burden the family. Some individuals are required by law because of a divorce degree or business agreement to have life insurance, so obtaining a good life insurance policy is not optional but mandatory. Whatever your life situation, you most likely can benefit from some sort of life insurance policy.

What is the Difference Between Term and Permanent Life Insurance?

Term and permanent life insurance plans are quite different. The largest difference is that term life does not accumulate a cash value (while the insurer is alive) while permanent accrues a cash value that can be utilized during the insurer's lifetime. Term life will pay death benefits during the term (often, the terms are 10, 20 or 30 years) provided that it is an active policy at the time of death. Permanent life insurance, is not for a specific term, and can be carried throughout your life. It involves not only the insurance premiums but also a savings or investment portion (this is the portion of the policy that gains cash value), also known as a cash value account. Permanent life also provides death benefits, and because of the investment portion, the monthly premiums are often higher than those for term life.

What Are the Types of Life Insurance?

This is the most common type of plan and the one that most employers offer employees as a benefit. Often, term life is an inexpensive life insurance option, and the premium rate is locked in for the duration of the plan. This is a good option if, for example, you plan to be debt free when you retire and you just want coverage until your children are of age.

This is a permanent life insurance option that can be kept for the rest of your life. The monthly premiums are at a set rate, and it includes a tax-protected investment or savings portion. As your cash value accumulates, you may borrow against it, surrender your policy for a payout or collect dividends. Premiums are often high, but the cash value benefits can be quite helpful.

Universal can be more difficult to understand than term or whole policies. The briefest description is that it is flexible, and for this reason, it's often referred to as adjustable life insurance. You can adjust your death benefit amount, when you pay your premiums and how your benefits are paid out. It can accrue cash value, but the balance is not tax-protected and interest, as growth, may apply. This flexible type of insurance plan may be suitable for those who may not be able to predict their future life circumstances, so they can change it as they go.

This is a permanent type of life insurance and, often, is one of the more expensive options because it lets you control, to an extent, your investments. For example, you can allocate that a certain portion of your cash value account go to an investment portfolio that may include stocks, bonds or various funds. However, you cannot withdraw funds, and the higher investment risk can make the actual death payout unpredictable. This could be a good option for those who already have other investments they are utilizing for their personal use.

This is basically variable life insurance that is flexible, like universal life insurance. This type of insurance provides death benefits and allows the policyholder to create sub accounts similar to mutual fund accounts. The contract owner can then decide how much goes into the separate investment accounts. Similar to universal policies, when premium payments are due is flexible, and the plan will not lapse unless there is not enough cash value to pay the premium balance. Before acquiring this type of life insurance, you may want to compare the cost of variable universal life premiums against what you would pay for term insurance and your investments separately to determine what the best option is for you.

Life Insurance: What We Evaluated, What We Found

While your unique circumstances will dictate your premiums and the type of insurance you'll want to purchase, we provided sample pricing to help you budget insurance costs. We also examined the process your beneficiaries, including your loved ones and/or any business partners, might have to go through to submit a claim. While all the insurance companies we reviewed demonstrate a high financial rating, we also gathered information from the four largest rating companies – A.M. Best, Fitch, Moody's and Standard & Poors – to show the companies that are well rated.

To create our insured profiles we used to secure price quotes, we considered the age at which one might want to purchase life insurance as well as the health status of the average American. Most of the sample quote rates you see in the marketing literature is based on the ideal health profile, which is usually a healthy female aged 30 to 35. However, nowadays nearly 70 percent of adults in the U.S. are considered overweight and around 20 percent use tobacco products.

We gathered baseline quotes for a healthy male and female aged 35. We used the average male and female height (5&;49quot; and 5&;99quot;) and a weight that demonstrated a normal body mass index (125 lbs. and 155 lbs.), or BMI, a height-to-weight calculation that is indicative of an individual's body-fat levels. A high BMI is associated with a higher level of body fat and a predisposition to certain metabolic conditions, such as diabetes and heart disease.

We then took the same profiles and added separately two health issues: one being overweight, but not obese (166 lbs. and 195 lbs.); and one for using tobacco products. For the price quotes of a hypothetical overweight adult, we used the average weight for adult Americans, which is considered overweight.

Because geographic location is not as major an influencer to the cost of life insurance as health issues, we used the zip code of our corporate offices in Ogden, Utah. As you will see in our price comparisons, these two health issues show how much your rates can change based on lifestyle choices. It also shows how much you can save by improving your health.

Unlike other types of insurance, life insurance is not required unless it is legally enforced because of a divorce decree, business contract or other legal agreement. But it can greatly help your family should you pass and leave them with debt, funeral costs and the loss of your income.

Most insurance sites offer coverage calculators to help you determine how much coverage you may need. At the bare minimum, you'll most likely want to cover your debts and funeral expenses. If you can afford a higher premium, you may also want to coverage that helps your family maintain their standard of living and pays for your children's education.

Some factors to consider when estimating how much insurance you want to acquire include:

Spouse's or partner's income or ability to earn (Some may only choose to provide about a year of replacement income until the spouse can get through the legal and estate issues and acquire employment.)

Age and number of children (Young children may need daycare, private school and health care; older children may only require a few years of expenses covered.)

Cost of funeral and last wishes (Best to control costs by having a written end-of-life plan; the average funeral costs about $7,000.)

Last medical bills (Even the best health insurance plan will not pay 100 percent.)

Long-term care of a disabled child or spouse (You'll also need written documentation specifying how you want them cared for.)

Mortgage and other debt (You can even create agreements to have specific debt paid off as part of your life insurance policy in some cases.)

Business debt and agreements (You may have legal agreements with your business partners or you don't want the business to fail after your death.)

Cost of college or children's education (Although college tuition would be for a grown child it could help them succeed in the long run.)

Inflation (Factor in at least 3 percent inflation per year and also consider whether your family may have to move to a higher standard-of-living area to be closer to family)

As you can see, the figure for what your beneficiaries may need can add up to well over $200,000, especially if you have a mortgage. Even if your employer offers $50,000 to $150,000 for free, you may benefit from acquiring a supplemental life insurance plan to meet all of your family's needs. After you have outlined what you think your financial needs will be, you'll want to meet with a financial advisor to put together your plan, including legal documents, like a will and trust, or a buy-sell agreement if you're an owner of a business, that you might need.

While you can create a customized life insurance plan as well as a will and trust, some companies offer specific types of policies that you might be interested in. For example, some insurance companies offer family plans that cover your children for a reduced rate or for free. Survivorship policies can be created to cover two persons, and the plan will be paid out to the survivor. This type is often used for married couples or even business partners. In addition, some insurance companies have resources to help you put together a plan to care for a special-needs child or spouse. Yet another option is long-term care insurance. Long-term care is highly recommended since people are living longer after retirement and health care costs are high. However, it is best to obtain this type of insurance while you are still young and healthy. In general, a life insurance plan can be created to protect any type of financial situation.

How to Obtain a Life Insurance Quote

In most cases, you can obtain a quote online using your basic health information; however, some insurance companies may require you to contact a local agent. To obtain an independent life insurance policy, in most cases, you will need to submit to a health screening. Usually an insurance company representative will visit you in your home or office to perform the exam. You'll need to give them accurate information about your previous or existing health issues as well as activities that may put you at risk, such as piloting a plane or skydiving. You will also likely be asked questions relating to your general mental health such as your mood, stress levels and any past or current mental health diagnoses.

You'll want to refrain from alcohol, nicotine, caffeine and stressors before the exam this will help you achieve optimal results from your urine, blood and blood pressure tests. Once your results are evaluated, you'll receive your actual quote and policy information. If you have known health issues, you'll want to obtain several quotes since all insurance companies rate health issues differently. If they decide not to provide you with coverage, you'll want to contact another insurance company, improve your health or investigate a no medical exam-type policy.

How Your Premiums Are Determined

Life insurance premiums rates are heavily influenced by your age and health, more so than geographic location. Your weight and whether you smoke are two of the biggest factors, since obesity and smoking are associated with high mortality rates. Most insurance companies look at other types of indicators, such as gender, blood pressure and cholesterol levels. Physical exams also might include blood and urine tests to look for indicators for diabetes, hepatitis, HIV, kidney problems, nicotine levels and illicit substances. Maintaining a good weight and BMI as well as good, overall health will greatly decrease your premiums.

If you are wondering how a life insurance company may view your health, you may want to check out John Hancock's website, it provides a vitality age calculator that tells you what your "age9quot; is based on your height, weight, blood pressure, and other factors. For example, if you are 42 years old and smoke tobacco, your "age9quot; may be something like 52. And as uncomfortable as that might be to think about, that is how insurance companies consider you when assessing your risk of mortality. The calculator also gives you some ideas about how you can improve your health to lower your rates.

High-Risk Health Insurance Options

Fortunately, there are options for those who fall into high-risk categories or those who have overcome a major health issue. Your first option is to see what coverage you may be able to obtain via standard life insurance with perhaps a higher premium. If you have recovered from a serious illness such as cancer, but are in full remission, you still might be able to obtain a standard policy.

Even if you are older and cannot pass a medical exam, there are still options, albeit costly ones, available to you. Although it might be tempting, it is best not to fib with your insurance company to get a lower rate. If you are found to provide false information when you signed up, it can be considered fraud, and your death benefits might not be paid out. You are better off paying a higher premium and being honest upfront.

High-Risk: Temporary Health Issues

While you cannot change your age, other health issues may be temporary. If you have recovered from a major illness and are healthy now, you likely can get a standard life insurance policy. If you are obese and/or smoke, you can still obtain insurance in most cases, although often at a higher rate. However, losing weight and quitting smoking can greatly lower your rates.

Most insurance companies allow you to be considered a non-smoker if you have quit tobacco entirely for a duration of two years or more. If you use nicotine via an e-cigarette or vape device, many insurance companies will give you the smoker rate if nicotine appears in your blood tests. Some insurance companies may also offer some lenience for those with high blood pressure or cholesterol if it is easily controlled with medication. Again, your rates may be higher, but these situations are most often insurable.

High-Risk: Long-Term Health Issues

If you are over 45 and know you would not likely "pass9quot; a standard required medical exam, you still have two options – simplified issue and guaranteed issue life insurance. Simplified issue coverage does not require a medical exam (only a few medical questions to answer), but premiums are typically two to four times higher than other policy premiums.

Guaranteed issue life insurance does not require a medical exam and you do not have to answer medical questions. In most cases, benefits are not be paid out until premiums are paid for an agreed amount of time, often a few years, or only a portion of the premiums will be paid out as death benefits. This type is often the most expensive life insurance option and should only be considered when all other options are exhausted.

Our Verdict and Recommendations

While all insurance companies factor health issues into your policy, not all insurance companies view your health the same way. For example, if you are overweight, Nationwide may be a good choice since it might not raise your rates. If you are a smoker, Liberty Mutual may be worth looking into. While Geico and Progressive do not usually provide life insurance, they may be able to generate quotes from numerous companies for preliminary rate shopping. MetLife, which was our Gold Award winner, costs more, but it appears to provide the most services to beneficiaries.

We recommend you obtain quotes from a few agencies and submit to more than one health exam to obtain the best rates. Also, consult with a trusted financial advisor, accountant and/or attorney to ensure that your paperwork is legal and that your assets are managed according to your wishes.